(Updated at 7:43 p.m. ET with additional data.)Want to see a fuller picture of the implosion in USA Today's advertising revenue? Check out the chart, above, which I compiled today in a review of Gannett's quarterly financial reports over the past two years.
The documents reveal the hair-raising decline in the paper's paid advertising pages, plus a little-noticed change last summer in how GCI details revenue trends at its biggest daily. They also explain USAT's deep cost-cutting since early 2008 -- reductions still underway, with the latest round of unpaid furloughs and an extended wage freeze. And they show the mounting challenges faced by Dave Hunke, now entering his second year as publisher, and his reorganized advertising sales team, as they try clawing back lost revenue.Big slide since '08
My curiosity was aroused by last week's first quarter earnings report, which created a fuzzy picture of USAT's ad revenue. The report said total paid advertising pages rose 3.2% from the same quarter in 2009: 544 vs. 527. But the accompanying language suggested that dollar revenue remained lower, probably due to discounting -- a bad sign, since that would mean sales were down even from the year-ago period, when the economy was the worst since the Great Depression.
Now, look back two years ago, and you'll get an even greater sense of how bad things have become. USAT's total ad pages have slid 34%, from 826, as the recession took hold in the first quarter of 2008, the documents show.
Reports changed quietly
What's more, my review uncovered a change Gannett quietly introduced last July in its quarterly earnings reports for the general public, those cited by the news media. GCI started omitting USA Today's percentage change in revenues from the prior-year periods. Instead, Gannett began reporting only page counts, obscuring the true revenue picture.
I found the missing revenue rates in so-called 10-Q documents with the U.S. Securities and Exchange Commission. Those are filed with the SEC after the general earnings releases, and are often overlooked by the media and some stock analysts.
As you can see in the chart, the trend has been terrible: Ad revenue in last year's third quarter -- the most recent available -- plunged 37% from the prior year, as ad pages plummeted to 493 from 713, the 10-Q shows. Indeed, the documents say the last time USA Today's ad revenue grew was in the first quarter of 2008, when it rose 2.1% from the year before.
More missing data
Gannett disclosed only limited fourth-quarter USA Today data, in the annual 10-K filing that covers all of 2009; that filing doesn't give USAT's revenue rate change for the quarter. In place of that, it says:
"At USA Today, ad revenues were down 29% for the year, reflecting the continued slowdown in the travel and lodging industries. Paid ad pages were down 26% for the year and totaled 2,326 in 2009 compared to 3,158 in 2008. Fourth quarter comparisons were the best of the year and in December, USA Today ad revenues were nearly even with 2008."
We won't see this year's first quarter figures until the 10-Q is filed in the weeks ahead, so we don't know whether December's "nearly even" trend continued into the new year. The convoluted language in last week's earnings statement leaves that in doubt.
Finally, for an even fuller measure of USAT's ad revenue decline, consider this: Ad pages hit their last peak in the fourth quarter of 2008 -- traditionally the most robust, because of holiday spending -- when the paper reported 1,045 paid advertising pages, the documents show.
Earlier: USA Today by the numbers: 32 pages, 35 ads. Plus: Publisher Craig Moon quits amid steep ad sales decline
[Image: today's paper, Newseum]
No wonder Brad Robertson is in Arizona to start an ad call center. Gone are the days of actually selling ads, now Gannett just plays three-card monty and pats itself on the back.
ReplyDeleteJim,
ReplyDeleteYou hit the nail on the head here. There is more to your numbers. They are now combining USA Today numbers and some digital numbers in their print ad revenue's.
The USAT numbers are declining in a market that is growing. They cannot even grow at the current level we are seeing from other paper companies.
Hunke is at a true loss here. He is definitely way over his head.
My prediction is they'll beat on both pages and revenue Y-o-Y for the last three quarters of 2010.
ReplyDeleteIt's 2011 where the rubber meets the road on whether "secular decline" continues.
2009 is a false baseline, and they'll benefit from that the rest of this year. Read the 1Q report (and not just their's, btw) and you'll see there are general reports around the publishing/broadcasting world of acceleration of ad spends exiting 1Q. The head of Marriott hotels was on CNBC this morning, and he even sees the business travellers coming back now in their various chains that cover top to bottom of the hotel industry food chain.
How many times have we heard the economy has hit a bottom and now is turning around? Look at unemployment, heading to 10 percent next month. With one out of 10 Americans with no job, that is 10 percent of the economic potential not spending. Wait and see what happens to housing when the credits run out at the end of this month. We are in an abyss we have not seen since the Great Depression, and advertising reflects that. Maybe 2012 will see a turnaround, but all this talk about one coming right now is just talk.
ReplyDelete6:22 pm: You write: "They are now combining USA Today numbers and some digital numbers in their print ad revenues."
ReplyDeleteQuestions: How were those digital numbers previously reported? And are you talking about digital advertising revenue, or some other kind of digital revenue?
This comment has been removed by a blog administrator.
ReplyDeleteFollowing is an edited version of a comment posted by 10:25 pm:
ReplyDelete6:22 is correct. The print sales team is selling print and digital and now booking the "digital" revenue as "print". Total bullshit numbers from people like [XXXXXX] and the rest of the USAT sales team.
Saridakis's new pitbull VP of National Sales, Andrew Jacobson, is calling the USAT sales team out. The days of combining Print and Digital upsell as all print will stop.
Hunke is pretty clueless and plays the Mr. Magoo character really well.
10:25 pm: Keeping digital and print separate or combining them must be an internal accounting function. In its public filings, Gannett has never published separate figures for USA Today's digital and print revenue figures; digital is always included within the overall ad revenue figures.
ReplyDeleteThe same is true for USCP and Newsquest. For example, here's what the latest 10-Q report, for 2009's third quarter, says:
"The Company’s publishing operations, including its U.S. Community Publishing Group, the USA TODAY Group and the Newsquest Group, generate advertising revenues from the operation of Web sites that are associated with their traditional print businesses. These revenues are reflected within the retail, national and classified categories presented and discussed above, and they are separate and distinct from revenue generated by businesses included in the Company’s new digital segment. These online/digital advertising revenues declined 19% for the quarter and 22% for the year-to-date period, principally due to reduced employment advertising."
In the weeks ahead, we'll see data for this year's first quarter when the next 10-Q is filed.
So these ad numbers explain why Hunke received a $300,000 bonus last year. Interesting to see how this is justifiable. But then, how can you justify a bonus for a publisher who cuts staff, continues wage freezes and furloughs employees for up to three weeks a year?
ReplyDelete